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Kirsten Andersen

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Even an Idiot Can Understand
Why the New Economy is tanking

by Kirsten Andersen



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I will admit it -- I am a financial idiot. My checkbook register has been screwed up since 1997, and the only stock I’ve ever held was $200 worth of K-Mart that an old boyfriend bought me because the ticker symbol matched my initials. If I ever had an idea for a business venture, it would be quickly squashed by my own ineptitude. It is not that I am proud of any of this. To the contrary, it is rather embarrassing. But I am becoming increasingly thankful for my lack of financial savvy.

You see, despite my apparent inability to grasp the finer points of Wall Street, I am gainfully employed. This is more than I can say for a lot of folks in the weird world of e-business. News of layoffs dominates business headlines, and the latest casualties of the dot-com implosion are none other than the ones covering the carnage -- the folks at The Industry Standard.

The rise and fall of this Silicon Valley insider magazine is strangely parallel to those of so many of the online business ventures it once covered. From its beginnings as the brainchild of an entrepreneur and a journalist in 1997, to its meteoric rise to the top of its class by 1999, to its stunning demise last Thursday, The Industry Standard was a virtual mirror image of the typical technology upstart of the late 1990’s.

A few years ago, as an outsider, I watched with fascination as literally thousands of companies with nothing more than a couple of bright-eyed young guys and a questionable but cleverly worded business model secured millions of dollars in venture capital. I naively assumed they needed the money for things like technical equipment and personnel, but a quick look at the online auction houses reveals they needed it for $700 Aeron chairs, a circular coffee bar, and a foosball table. Other published evidence suggests they also needed it for lavish rooftop parties and employee happy hours complete with top shelf liquor.

Now, I may be a financial idiot, but I think I know what went wrong in the brave new world of e-commerce. The most painfully obvious reason for the failure of these "New Economy" businesses is simply that they spent all of their money on useless crap. If there is any reason the company I work for still exists, it is because its employees sit on 15-year old K-Mart chairs and only get free drinks on very special occasions. Company funds are spent on things like production and marketing -- stuff that keeps you in business. Money also goes to employees’ salaries -- something that certain participants in the "New Economy" were apparently happy to all but give up in favor of stock options and cocktail parties.

The other two major problems this financial idiot sees with the "New Economy" businesses are that few of them offered anything useful, and most of them offered their useless services free of charge. Take, for example, another soon-to-be-kaput company (closing Aug. 26th), offered points for visiting partner websites. All one had to do was download a "beenz counter" which kept track of the points, surf the various partner sites to earn the points, and go back to to redeem the points. A participant could use their beenz to purchase various items at the partner websites. The concept was not unlike that of a mall arcade, where you can play Skeeball for about three months straight, save up all the tickets you win, and then trade 20,000 or so of the tickets for a CD boom box. The main difference between the mall arcade and the "beenz economy" (I am not kidding, they really did call it that) was that the beenz economy required no hand-eye coordination (unless you count the complicated "point-and-click" maneuver).

Perhaps the "beenz economy" was useful to Skeeball-deficient fourth-graders, but the adult (read: business) world has neither the time nor the inclination to sit in front of a computer for two months counting beenz to earn a free CD player. Grown-ups simply work for a paycheck, then spend the money on whatever CD player strikes their fancy.

Speaking of money, I have yet to hear a sufficient explanation as to how expected to make any. The site’s founders touted beenz as ‘a globally accepted alternative to money,’ but since all six billion of Earth’s citizens currently use money as currency, the management faced an uphill battle of ludicrous proportions. Even if had a snowball’s chance in hell at achieving economic world domination, its founders would have needed some sort of real income to use to reach that goal. Apparently, like many failed dot-com entrepreneurs,’s founders expected to secure round after round of financing based on nothing more than a promise of planned success.

If I applied for a multi-million dollar loan based on a promise that I was ‘planning’ to win the Powerball lottery, I would be laughed out of the bank. But this is basically what thousands of young men and women have asked for -- and received -- by wooing investors too awed by new technology to realize they are being had. Kids fresh out of college were walking into venture capital offices as recently as last year armed with only a PowerPoint presentation and a get-rich-quick scheme. They walked out of those offices with money to burn, and burn it they did. Thanks to their actions, the economy is tanking, and it took a financial idiot to figure out why. Now, will someone explain it to Alan Greenspan?

See also:  Mario the hundreds of e-mails received after his appearance on Hannity & Colmes

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